Why does Starbucks pay so little tax? - MoneyWeek Investment Tutorials
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- Опубликовано: 1 ноя 2012
- Big, profitable companies can reduce their corporation tax bill to almost nothing. Tim Bennett explains how they manage it.
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He actually starts at 6:27, skip to then if you just want him to start explaining.
Thanks god!
@@terryz.9918 thanks for the tip I was about to leave this video the presenter needs to get a grip and learn about effective presentations, I'm sure they must be that shit on YT somewhere...
Took 6 minutes providing explanation to 6 year olds.
God sake... should of come straight to comments
Thanks
Really excellent video, carefully explained and easy to follow (not too fast!), I like your style.
This guy is the best finance teacher on RUclips. Great watching. He’s really opened my eyes to a lot.
And, to detail a little bit more, the LOSSES part is also split into a few types of losses:
- overheads/running costs: salaries, utility bills, etc.
- expansion costs: costs of expanding the operations like new offices, new factories, new other infrastructure.
- R&D costs: research & development that costs you money to discover new ways of improving your business and the economy as a whole and even bettering people's lives(like discovering a new cancer cure or inventing a faster aeroplane or making a new spaceship or simply discovering a new product that makes your customers checkout faster and that saves you or them time/money/energy or anything that moves you and society forward).
All these are considered LOSSES for a company, and rightly so.
Modeled on that, I ought to be able to write off every material bit of my existence and be tax-exempt, as a wage earner of meager means. Almost every dollar goes to 'maintenance' of some sort, and rarely to profit or outright enjoyment. ; ]
Dude we're talking about Starbucks. They're a liquid cake store.
You Sir are a great presenter, cheers!
You, sir, are very well documented on many levels and most important, you've got a remarkable ability to share your knowledge with the rest of people in such a way that it is easy to understand. Your popularity should be much higher.
Cheers to you!
Just found this channel, well explained Tim! Looking forward to more videos.
Tax optimization is one area where there is a ridiculous amount of savings that can be made. Startups often cut corners on researching or investing a bit in financial planning, and in turn lose thousands of dollars that would go the long mile in helping them invest in better assets. Over time, as the company scales up, more and more revenue is lost due to lack of planning from day 1. Clearly, one can be defeated by competitors without proper financial planning.
Still immoral. No excuses!
John Benton You are an idiot. Tax is theft when it's not voluntary. Governments are not GOD. You can't steal a lot of someone's money simply because they optimised their opportunities and became wealthy whilst you stuck to your 9 to 5.
One job making money another job keeping it, no point just putting hard work into making it, in business you need to automatically put hard work into keeping it if just to keep a level playing field with the competition, but at the end of the day individuals seem to be paying most of the taxes not international corporations, so individuals need to start using the same tricks.
if everyone had your mentality there would be no national economy. regardless of either you like it or not, there are things (such as roads) that is much easier and time efficient in the long run for the government to control it. if no one paid taxes their would be no roads, or roads with too many tolls that will increase time traveled, gas spent etc etc.
@@saberur66 Tax planning is vital to compete with your tax planning competitors whether you like it or not, you simply don't have a choice, Govts compete to reduce corporation tax to attract investors so virtually how small you are, plumber, builder form a company to reduce taxes if you can't beat them join them.
So well said. Sent this to my 15 year old and he loved it. You are so good at explaining!
Awesome video, Tim! I love your teaching style and wish you had been my professor when I was in college.
This is why Amazon claims to be not profitable while they've been the biggest online retailer in the world. Meanwhile their stock has soared to all time highs.
Not a claim, a fact.
@@RichardG774 No, it is a claim. Reinvesting profits are still profits. We don't have that luxury. It doesn't matter how much of our income we spend, we still get taxed on all of it, so why shouldn't they?
@@RichardG774 individuals get income taxed before expenses. With the exception of the things you just mentioned like charity, moving. Certain Medical. But how many people I'm moving every year? How many people had those same medical expenses every year? The write-offs that the working stiff gets are not of things that stay in that household such as meals, phone bills, Etc. But everything else I have to agree with you on. This country's economy is designed to benefit businesses. And they are creating jobs so they should have incentives
@@RichardG774 yes you are correct I didn't think of that. But I guess because that is only temporarily. 2025 all of that goes away. I don't know what will replace it though but it's not etched in stone
@@RichardG774 yes true
Good info. Thank you for sharing. Please continue the great content.
Great video, again! The repeated information only makes it easier to understand! Thank you!
You simply remain providing instructive videos. You can keep them coming!
Yes... In India it us called Tax Accounting and Book Accounting. Govt has wised up and there is taxation linked to Book Accounting.
I love your content. Thank you for taking the time.
Yep - that was in a former life! And yes I enjoy my job even if it's not in the same league as my older ones money-wise...
Thank you. Really well explained!!
Found it by accident. Such a great talk. Could understand it all without any economical background
Thanks for the well done video. It is very easy to understand.
Liked and subscribed within about 5 minutes, very good video. Thanks!
Sir, you're making a student who used to be miserable in finance subjects, very passionate and knowledgable. Many thanks!
Thanks for sharing so clearly. Kudos!!!
This guy is brilliant. It's so easy to understand.
5:33 mentioned cost of the shops for a second then moved on. I'd like to see the amount of the total UK Starbucks sales that goes on property rents. People get angry about these tax approaches and completely overlook this part of the whole picture.
That was so well explained even your doodles looked great ha ha..... i subscribed... brilliant!...
Great video! You make finance easy and understandable.
Great videos, people like you make me interested in this topic.
That is it, I am going to loan myself money at 50% interest. Genius!
You have very interesting videos. Thank you again for a very good example. Was very grateful. Good job!
Very clear. Well explained. Thank you
All your videos are great. Thanks !
When I was wondering about offshore company, MoneyWeek gave me an solution , Thank you.
I like this guys explainations. Quite fantastic I must say.
Very interesting tutorial for business owners.
Easy to understand explanation. Thanks.
Respect from India.
thank you so much for your videos they really help
Thank you sir very well explained.
This was a Very simple solution explained in this video. The most interesting I would like to hear (but have not heard) is list of countries with lower tax rates where UK company can pay ("the royalty and debts") without problem with tax authorities and Bank complience.
very good videos. You very good at giving lectures. I am a undergraduate studying Finance, Accounting, and Management, so I appreciate these videos for free.
4 minutes in and I had to subscribe; I love this guy
In addition to three indicated ways of reducing corporate taxes, the UK subsidiary can buy its coffee or any other raw materials from another subsidiary located in a lower tax regime at a higher cost than it would in the UK.
There are several anti avoidance measures used by tax authorities to counter the Base erosion practises you described through thin cap and transfer pricing
Amazing video, Thank you.
thanks for the explanation, were Google and Amazon capitalise on the same methods ?
Nice video, easy to follow!
The first method involving intercompany charges (interest in this case) may not work as well as the other methods since the interest received by the Starbucks U.S. would be taxable in the US. So you don't pay UK tax because of the interest deduction, but you end up paying US tax on the interest income.
The third method does not work very well since Starbucks would have to incur a substantial operating loss in order to offset its income.
The second method is golden. It is often used by companies with valuable intangible property (patents, brands, secret formulas, etc.).
Any idea why Starbucks can't just up the salaries of the all the people in charge there (such that their costs are v large and they basically have no profits)? Is this not in interest because actually the personal income taxes are generally higher than the corporation taxes?
If taxation was less than it is in the UK, then the first method does work. They will never get away paying nil tax, but they will minimise it however possible.
@@joshuacolombi4538 The issue with this is that shareholders would be very upset.
In the third method think about new Starbucks restaurant being opened. There is only loss of money at the beginning of a shop. Furthermore this is the main reason why they are still more Starbucks restaurants. New shops = higher losses = higher revenue.
Brilliant video, well explained
He definitely makes good videos. Learnt a lot from his videos
Please make playlist for your videos
Nice video I like it. Holland is only two provinces of the Netherlands though and you talk about tax set by countries ;)
thanks for a great video.
Great and simple explanation
A bit of free information. These cases were part of the background that moved OECD Countries to take the decision of implenting the Base Erosion and Profit shifting project. Which last Action (Action 15 - Multilateral Instrument), was signed in 2017 and already came into effect in some countries. The mechanism were Tax Treaties, pricesly Double Tax Treaties, which in most part, follow the basic analytic structure as the Viena Convention over the Law of Treaties in 1969. So they implement a Master Treaty to integrate them into a common tax system, that in principle would make much easier to apply double tax treaties in an homogenous international environment (tax wise). It is logical, since the best ideas adopted by the most advanced economies on dealing with issues of treaty shopping, which is synonym of abusing loopholes in double tax treaties.
The most common strategy these companies followed is dubbed the Double Irish Dutch Sandwich as a sort "technical tax jergon".
great explanations.
Just curious: like the royalty trick, couldn't you set things up such that the UK stores are buying the paper cups and the coffee from the Starbucks cups sub-company in Holland?
That would offer some latitude to shift profits from the UK to Holland.
wow ... so nice explained -> really nice and interesting
great vid, thanks
The short answer to how they do this is within the tax law itself. As indicated in the video, the profits are reported in certain offshore locations and they are exempt from being taxed in the U.S.
Keep it up,tim!!!
The INCIDENCE of PAYE income tax and NI nominally paid by employees is on the employer. Add in UBR and VAT, and then it gives the real picture of the contribution a firm makes to the Exchequer.
Tim you are awesome!
I agree that as long as the profits are taxed in some country then that's 'fine'. It actually just shows a need for a reworking of the rules and perhaps internationalisation of such rules.
Where can we find a comprehensive list of tax schemes, Tim? Great video!
agreed with 2nd and 3rd point but if you transfer interest income to usa from uk, you will be increasing the income of usa operation where corporate tax is higher than uk. So, is it good idea for group to charge interest on uk operation?
This guy is amazing, even I understand this!
Excellent map.
As of 2021 Holland is introducing a witholding tax on outgoing interest and royalties, to stop big multinationals incorporate so called 'mailbox-companies' in The Netherlands. The problem in this case was the fact that The Netherland until now does not have a withholding tax on royalties. So paid royalties by the dutch entity weren't taxed.The corporate tax rate is actually pretty average with 25% on profits.
This is so informative
The author doesn't take on account withholding tax(19%) from interest and royalties paid abroad. There are Double Taxation agreements between USA - UK, and Holland - UK, I know. But HMRC permission is required to pay interest or royalties out of tax.
Wow this is powerful 👏 thank you sir
Avoid taxes is a human right.
Education, healthcare, security, housing, etc... these are actual human rights and people have access to such things thanks to taxes.
Good luck getting those in societies where people don't pay taxes.
@@Goreuncle I'm from Argentina. Good luck trusting the government to manage your money.
Hi mate, can small Ltd business apply these skills. Or it's only big corporate that can?
I Love This Information !
Actually there are stringent Transfer Pricing rules which make this illegal.
Need more videos like this please 😄
Millions of middle class, fix income 1040 people pay the most taxes by percentage.
Simple fix, use personal income tax approach on companies. Initial revenue below threshold free, above that pay incrementally increasing percentage. Domestic businesses are suffering and as a result people get less pay, less overall wealth.
Great video as usual, I'd recommend all of these to anyone as ignorance of the facts will end up with you getting screwed. Watch this fella and empower yourself with knowledge:)
Won't there be UK witholding tax taken off the interest payments to the head office in the USA?
But if uk doesnt pay tax then USA will pay for intrest or Holand for Brand Landing so on the end comapany as a whole pay the same ?
How do you do this at a local level or with a small start up business?
Tim I simply love the way you explain these things. You should think about becoming a university professor!! ;)
Great stuff.
Great Vid!
Well explained
* I've just realised this video is from 2012. So here are some updates:
Firstly, the interest issue is covered by anti-avoidance legislation such as Transfer pricing, Thin Cap, Worldwide debt cap.
The trade loss is not a tax avoidance method, as the loss was made in UK. It can't transfer a loss from overseas. It is not a relevant example.
Indeed, the royalties method was one that SB used, although this was not the main one.
The main factor was SB made a Co in another country, smt like Starbucks Switzerland if I recall, from which SB UK buys it's beans. SB made the cost of the beans high enough that they would have no profits. Now there is an anti-avoidance rule, 'Diverted Profits Tax' which HMRC made specially for this type of schemes (the Google tax lol). But somehow SB's lawyers managed to convince the courts that they had 'magic beans' which could not be compared to market value, and their inflated prices were accurate.
However, thanks to the bad publicity they paid some tax at the time, and are now making/declaring profits to not lose customers.
You forget about cost transfers, like Apple does in Spain, internal sales are so high that barley leave any profits to be taxed in Spain so the profits are taxed in Ireland at 10% instead at 25% in Spain.
Is SB an ipo? Is it a good company to buy shares ?
looking in to tax havens that are legal... looks like Jersey The Cayman Islands or the Bahamas are great choices. Any experience on this or pointers? Thanks
Nice explaination, however, I thought the tax scheme includes Ireland in the story?
UK has no withholding tax for Interest and royalty? the profit needs to be recognised eventually within the group, and unless the profit is eventually recognise in a lower tax countries, these method don't save much, right?
Excellent.
Also any successful business will open more branches, and spend on advertising and marketing to expand its brand.
Spend profits back on the business rather than paying tax.
Very Interesting. Could you also share an example on Google, Apple, Amazon and Ireland
Excellent!
great video.
Great video.
On top of that, it's so silly to move profit to USA, cause corporation tax higher. Transfer pricing requirements in USA should also be applied...
But the Corporate tax rate in the Netherlands is 25% as well. So how are they making a profit? Or are royalties taxed at a different rate?
Brilliant. I will hazard a guess this whole convoluted system had to be created out of necessity to avoid corporation tax rises in the past?